Budget 2022
On 19 May 2022, the Minister of Finance the Hon Grant Robertson (the Minister) announced the Government’s Budget 2022. Aside from the introduction of the Cost of Living Payments Bill, the Budget also included other announcements that will impact the Inland Revenue.
- From 1 July 2023, child support collected by Inland Revenue will be treated as income and passed on to sole parent beneficiaries. Currently, the State can hold onto child support payments to recoup the cost of welfare.
- Permanent baseline funding has been provided for Inland Revenue’s ongoing administration of the research and development tax incentive. This will allow 35-45 IR employees to continue to review RDTI claims. Current funding was due to expire on 30 June 2022.
- Inland Revenue has been provided with additional funding to retain up to 240 FTE employees to continue to support the response to and recovery from COVID-19, including addressing unfiled returns and supporting customers getting tax obligations right from the start.
You can also access our analysis of the impact of this budget on the tax landscape here.
ACC works on bringing the income insurance scheme into operation
On 24 May 2022, the Income Insurance (Enabling Development) Act 2022 (No 26 of 2022) received the Royal Assent. The purpose of the Act is to enable the Accident Compensation Corporation (ACC) to carry out work to bring an income insurance scheme into operation, should it be established under subsequent legislation. Nothing in the Act is intended to limit or affect the scope or design of any scheme that may be provided under such legislation. The Act is effective on 25 May 2022 and is repealed on the close of 31 March 2025.
Law changes on stopping tax evasion on water-pipe tobacco
On 24 May 2022, the Customs and Excise (Tobacco Products) Amendment Act 2022 (No 28 of 2022) received the Royal Assent and enacted changes to the Customs and Excise Act 2018 aimed at preventing millions of dollars in potential tax evasion on water-pipe tobacco products. The Act came into force on 25 May 2022.
Duty on water-pipe tobacco products will now be based on the weight of the product, rather than the previous system where excise was calculated on the tobacco content declared by importers, which Customs was unable to verify. The new excise and excise-equivalent duty rate for water-pipe tobacco is $234.77 per kilogram.
Amendments to the Customs and Excise Act 2018
Section 95A, which relates to the prohibition of certain tobacco products, has been amended. The effect of the amendment is to make water-pipe tobacco a prohibited import. The prohibition does not apply to water-pipe tobacco imported by a person holding a permit issued under sch 3A of the Act or to a person who brings water-pipe tobacco into New Zealand with them (for example, as part of their duty-free allowance), and does not apply to tobacco that enters New Zealand temporarily (for example, as part of an international transhipment).
Deemed rate of return on FIF attributing interests
On 26 May 2022, The Income Tax (Deemed Rate of Return on Attributing Interests in Foreign Investment Funds, 2021–22 Income Year) Order 2022 (SL 2022/151) was notified in the New Zealand Gazette.
The Order sets the deemed rate of return used to calculate foreign investment fund income for the 2021–22 income year under the deemed rate of return calculation method set out in section EX 55 of the Income Tax Act 2007 (ITA 2007). The Order also sets the deemed rate of return for the 2021–22 income year at 6.01%. The deemed rate of return set for the 2020–21 income year was 4.43%.
Dry autumn in Waikato and South Auckland leads to drought classification
On 18 May 2022, drought conditions affecting the primary sector in the Waikato region and South Auckland (Franklin, Manukau, Howick and Manurewa-Papakura wards) have been classified as a medium-scale adverse event by the Minister for Rural Communities, the Hon Damien O’Connor, enabling a package of support for farmers and growers.
To assist affected farmers and growers, Inland Revenue is exercising discretion to allow late deposits for the 2021 year and early withdrawals from the income equalisation scheme. Taxpayers who have been affected by the drought, missed payment or filing dates, or are struggling to deal with their tax affairs, should contact Inland Revenue.
Customs Refunds and Remissions of Penalties and Interest
On 11 May 2022, The Customs and Excise (Refunds and Remissions) Amendment Regulations 2022 (SL 2022/129) amend the Customs and Excise Regulations 1996 by inserting new regulations 71E and 71F.
New regulation 71E prescribes circumstances in which Customs must refund or remit any interest or penalty payable in respect of certain duty that is not fully paid on or before the relevant payment date. Customs must refund or remit the interest or penalty if the duty payer’s ability to pay on time is (or was) significantly adversely affected by the effects of COVID-19, the duty payer notifies Customs of that fact, and the duty has subsequently been paid (or the chief executive is satisfied that the duty will be paid).
New regulation 71F prescribes the circumstances in which Customs must refund or remit any interest or penalty payable in respect of duty relating to fuel that is not fully paid on or before the relevant payment date. Customs must refund or remit the interest or penalty if the duty payer’s ability to pay on time is (or was) affected by the effects of the reduction in fuel duty rates that came into effect on 15 March 2022, the duty payer notifies Customs of that fact (and provides certain evidence), and the duty has subsequently been paid (or the chief executive is satisfied that the duty will be paid).
Both regulations provide for its revocation on 25 March 2023.